New law puts cap on payday loans
There's been a lot of chatter about payday loans, but very little action lately. However, something is being done as Chancellor George Osborne said that a new law would be passed which would put a cap on these short-term loans, saying that it was a "logical step" to put a limit on the levels of interest providers can charge.
"We've taken steps to control things like the rollover of those loans and I think the next logical step is to cap the overall cost of credit," he told BBC radio. "It's working in other countries, it helps hard-working people, and in fixing the banks we need to make sure we fix all parts of the banking and financial system and payday lending is part of it."
The FSA has been criticised for not imposing such a cap in the past in a bid to get some control over the industry. Tasked with deciding how a cap would be set and implemented, the new financial watchdog, the Financial Conduct Authority, will be on-hand to shore this all up.
Richard Lloyd, him from Which!!! responded to the news: "We're pleased the Government is committed to taking tougher action on payday loans by capping the sky-high fees and charges that drag people down in a spiral of debt. This will need to be part of a wider clean up of the credit market. The Government and the Financial Conduct Authority must clamp down on irresponsible lending and excessive fees across the board, whoever the lender."
Whether this will take people directly into the waiting arms of illegal loan sharks (who Vince Cable calls 'The Baseball Bat Brigade'), is another matter.